How To Prepare For A Home Appraisal In Oklahoma City

When you own a home, appraisals are key to understanding its value and how much you can borrow. In this post, we’ll discuss why home appraisals are important, the factors that influence them, and their impact on your transactions, especially with Circle Home Buyers.

An appraisal independently assesses your home's value by considering its condition, recent sales of similar homes in your area, and any unique features or upgrades. Typically used when buying or refinancing, appraisals also provide valuations for contracts, divorces, and more. Learn how to prepare for an appraisal and get tips to boost your home’s value.

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Mastering the essentials of the home appraisal process

There are three main types of appraisals: automated, drive-by, and full. Each type offers varying levels of detail and accuracy, with costs increasing accordingly as you move from automated to full appraisals.

Appraisers are independent professionals with no stake in your home's value. They receive extensive training and licensing to provide accurate valuations. These valuations are crucial for home sales, mortgage lending, and other situations requiring an impartial opinion.

An automated appraisal, often called a "desktop appraisal," relies solely on your home's description and recent comparable sales. The appraiser uses tax records and MLS data from their computer, without physically visiting the property.

A drive-by appraisal combines desktop information with a visual inspection from the street. The appraiser assesses your home's curb appeal, exterior condition, and neighborhood appeal without entering the property, so no appointment is necessary.

Full appraisals are the most comprehensive. They include an interior and exterior inspection, measurement of square footage, and photographs. The appraiser schedules an appointment to walk through the home, typically without the homeowner present. However, you can highlight special features or improvements before the appraisal begins, but avoid attempting to influence the appraiser's valuation once they start their work.

The significance of appraisal values

Understanding home values is essential when navigating the home buying and mortgage lending process. Your journey begins with an appraisal, a crucial step where a professional determines your home's worth. This appraisal influences your home equity, calculated as the value of your home minus any loans against it. Your home’s value directly impacts how much you can borrow, your down payment, and the interest rates and fees you'll face. If the appraisal is too low, you may find yourself unable to secure a loan at all, which can be quite frustrating.

Different lending products respond uniquely to your home's appraised value. For instance, consider a home equity loan or a line of credit (HELOC). A home equity loan comes with a fixed interest rate, whereas a HELOC offers a variable rate. The amount you can borrow typically depends on a percentage of your home's appraised value after accounting for any outstanding loans. Imagine you own a house valued at $450,000 with a $250,000 mortgage. Depending on the bank’s loan-to-value (LTV) policy, you could potentially borrow up to $100,000 if they go up to 80-90% LTV.

Refinancing your home is another scenario where the appraisal plays a critical role. When you refinance, you essentially replace your current mortgage with a new one. The appraisal will determine the new loan’s LTV ratio, which can influence your eligibility, interest rates, and associated fees. In some cases, if the appraisal is lower than your existing mortgage balance, you might need to bring extra cash to the table or face the disappointment of not qualifying for the loan.

Finally, consider the home equity investment (HEI) option, such as Point’s Home Equity Investment. This program allows you to tap into your home’s equity without the burden of monthly payments or income verification. With HEI, you share your home’s price appreciation with the investment company, based on your home’s initial value. The appraisal not only dictates how much equity you can access through an HEI but also determines your home’s eligibility for the program, which requires a significant amount of equity.

What factors do home appraisers consider?

Before scheduling your appraisal, it's essential to understand what home appraisers look for. This knowledge empowers you to recognize which elements you can influence, how to accurately compare your home to others, and to set realistic expectations for your home's appraised value. By being informed, you can take proactive steps to enhance your home's appeal and value.

Appraisers consider several key factors during their evaluation. First, the condition of the property is paramount. A well-maintained home typically receives a higher value compared to one that needs obvious repairs, as appraisers account for the cost of necessary repairs when determining your home's value. Second, the size and layout of your home play significant roles. A spacious, well-designed layout can enhance your home's worth by offering better functionality and usability. Additionally, exterior appearance is crucial. First impressions matter, and your home's curb appeal can significantly boost its value. Fresh paint, a well-groomed yard, and attractive landscaping all contribute positively.

Recent upgrades to your home can add extra value and give it an edge over similar properties. Kitchen remodels, converting a half-bath to a full bath, or adding more bedrooms and bathrooms are examples of improvements that can increase your home's appraised value. Lastly, appraisers look at comparable sales in your local area. The recent sale prices of similar homes provide an idea of what buyers are willing to pay, helping the appraiser determine a fair market value for your property.

What can lower a home appraisal?

To get the highest value for your home in an appraisal, it's crucial to understand the factors that could negatively impact its value, whether you’re refinancing or selling. Being aware of these elements allows you to address them in advance and set realistic expectations for your home’s appraised value.

One major factor that can lower your home’s appraisal is deferred maintenance or visible damage. Any damage, incomplete repairs, or signs of neglect can significantly reduce your home's value. Appraisers deduct the estimated costs of these necessary repairs from the overall appraisal amount, which directly affects the value you receive.

Outdated or non-functional features also play a critical role. Homes with outdated decor, appliances, or layouts tend to receive lower appraisals. On the other hand, modern, updated homes offer more value to prospective buyers, often resulting in higher appraisals. Additionally, a lack of sufficient square footage or functional rooms can lead to deductions in value. Appraisers consider the features and functionality that buyers typically look for, and if your home falls short, it will be reflected in the appraisal.

Finally, external factors such as negative neighborhood conditions or housing market trends can influence your home’s appraised value. While these are outside your control, they can cause your appraisal to fluctuate. If your appraisal value comes in lower than the desired loan amount, adjustments will be necessary. Homebuyers might need to come up with extra cash or negotiate a lower purchase price, while existing homeowners may have to settle for a smaller loan or wait until their home appreciates further.

‍What can boost a home appraisal?

Boost your chances of a favorable appraisal with these proactive steps.

First, ensure your property is well-maintained with regular upkeep. Address all routine maintenance tasks and complete any unfinished projects, as visible maintenance issues can significantly reduce your home's value. Recent renovations or upgrades also play a crucial role in increasing your home's appeal and value. Consider updating key areas like the kitchen or adding another bedroom, but avoid over-personalization and stick to a neutral color palette to attract a broader audience.

Additionally, location is key. When choosing your home, opt for a desirable area with appealing neighborhood amenities such as public parks, shopping centers, and quality schools. Make a list of these amenities to showcase the added value. Using high-quality construction materials and finishes in your home projects can also enhance its value, as appraisers recognize the longevity and appeal of such investments. Lastly, assist the appraiser by providing a list of recent sales of comparable homes at higher values in your area. These comparables can be instrumental if you need to dispute the appraisal.

How to get ready for a home appraisal: Tips and advice

Improving your home’s appraised value doesn’t always require a hefty investment. There are many budget-friendly steps you can take that offer substantial returns, drastically boosting your home’s worth.

Start by cleaning and decluttering. Remove unnecessary items, deep clean your home, and store excess furniture. A tidy, organized space not only looks better but also makes a strong impression on the appraiser.

Next, tackle any necessary repairs. Many small fixes are inexpensive and only require some time and effort. If you're not handy, you can learn from online videos or ask friends with the right skills for help. For small projects, hiring a handyman is often a more affordable option than bringing in a contractor.

Enhancing your home’s curb appeal is another simple, yet effective strategy. Spend a few hours pulling weeds, mowing the lawn, trimming bushes, and planting fresh flowers. These small tasks can make a significant difference in how your home is perceived from the outside.

Finally, compile a list of recent upgrades and provide relevant documentation. Inform your appraiser about the time and money you’ve invested in your home, including details about recent renovations and their costs. Show that you’ve complied with local regulations by presenting floor plans and permits, and include warranties for major items like HVAC systems or energy-efficient windows. This documentation can highlight the added value these features bring over time.

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Conclusion

Your home’s appraisal determines its value and influences how much you can borrow against it. A low appraisal can negatively affect your interest rate, fees, and borrowing capacity. In some cases, a low appraisal might prevent you from securing a new mortgage or require you to bring extra cash to close the loan. Thankfully, there are simple, cost-effective steps you can take to boost your home’s value and avoid these pitfalls.

By focusing on frugal yet impactful improvements, you can enhance your home’s appeal and increase its appraised value. Whether it’s tackling small repairs, enhancing curb appeal, or decluttering, these efforts can make a significant difference. For more personalized advice and to explore all your options, don't hesitate to contact Circle Home Buyers.

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